It’s been a six-year battle for Mike Dillon, who is trying to save his home from a foreclosure the courts say should never have happened.
It began in 2001, when the company servicing Dillon’s loan was sold. According to Dillon, he made a payment in 2001 to his servicer, but it had been sold to Fairbanks Capital, Dillon said. Fairbanks told him his payment was not received.
Read the rest of the ABC News article here
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I wonder if could have just refinanced the house with a totally different bank before this got out of hand?
So I want to here what others think of this issue:
Edward Jordan, a 79 year old retiree, put into an exploding ARM, qualified at a teaser rate of 1%, with his income inflated to $8,900 a month. He bought his home in the 1970s — he doesn’t DESERVE homeowner ship?
I don’t think so.
There were insentives, trips to Hawaii and Palms Springs, a former Countrywide employee said, if you closed the most loans, or the most options ARMs, but never a contest for the employee that closed the most FIXED home loan or loan best for the customers!
You don’t say?
Mozillo said he sold his stock in August because he has a lot of grandkids, education to pay for and obligations.
How ironic. You sell a product that you know people can’t survive on and then sell the stock at high prices so you can survive. Nice work, Godzilla — I mean, Mozillo.
In October of 2005 I went to Hawaii w/ my friend that worked for New Century. The company took 100’s of employees and their spouses or friends. We stayed 4 days at the Grand Wailea… too ostentacious for me but amazingly fun. They took the whole crew on an evening boat cruise and to dinner in limos to Lahaina. There were luaus, breakfast, dinners provided by New Century. All I could think was “OMG the mortgage business is doing amazingly well”. I remeber the speaker saying during one of the many toasts that there were clouds on the horizon in the industry. Looking back it makes me sick that New Century paid for this on the backs of “hard working” homeowners that most probably no longer own their homes. I only hope Countrywide gets their due. And all the other lenders/servicers/banks and the people that deride us homeowners struggling to hang on to our homes, credit, sanity and self worth.
Richard-
He probably should have refinanced with another company. I’m assuming he didn’t because the terms he got from his current mortgage was what he wanted. He probably didn’t want to incur another set of closing cost fee associated with a new transaction.
The very first time I heard about Fairbanks was involving this very same thing. The payment seems to never get posted. The payment vanishes. When the borrower gets a notice it’s months later. Since I’ve known about them (97′) they have been caught up in mess like this. As funny as this sounds, they are worse than CW.
JacMac-
For a L.O. to put a 79 yr old in an a.r.m. simply doesn’t make sense. I’m sure it was a no doc deal. To most lenders defense, they will catch the age and get more stringent with the L.O. If its a full doc loan. Most lenders will default the borrower’s income with retirement income, unless they can really, really prove they are still working and drawing a large income. With a note of 8k, assuming no other bills, his income would need to be in the area of 17k a month. If he’s making that amount of money each month, why does he need to refi. The loan never made sense from the begining.
Chris-
An underwriter/lender is not allowed to discrimate re: age, race, gender, sexual orientation, etc. If a borrower wants an ARM and he/she qualifies, the underwriter/lender has no choice but to approve it. It would be solely up to the LO to determine which product makes sense for the borrower and place him/her in the proper loan program that he/she qualifies for.
Also, I am curious……please clarify why you think putting an elderly client in an interim ARM does not make sense. I think putting an elderly borrower in a 10-1 ARM for a lower rate and improved cash flow makes more sense than putting him/her in a 30-year fixed for a higher rate when his/her lifespan statistically won’t be more that 10-15 years, at the most.
Virginia,
Underwriters have the lattitude to make common sense decisions that sometimes don’t appear on the product guidelines. The loans I have done for customers 65+ get scrutinize more because of their age, especially when the product is a stated one. It falls dangerously close to predicatory lending. I know you can’t discriminate. I’m not saying that at all. You can give a person 200 years old a loan. My point is realistically, underwriters are or at least the ones I deal with are harder on the information because of it. Will you get an underwriter to admit that. No. But that’s what happens.
And yes you are right, it falls back on the L.O. if the deal is approved. That’s the problem. Why would you do that to someone that is on a fixed income?
As far as the sense of an A.R.M. for someone that old. I don’t know if its a 2/28 or a 10/1. You might do it but I wouldn’t. If he lives to be 89 then what? Another 10/1 arm and some more closing costs? Do it right the first time. How about buying the rate down on a thirty year fix and explaining the benefits versus the quick fix. He lives to be 89 and he still has his house and a piece of mind. Sometimes what a customer wants isn’t always the best option.
If he was 29 that’s a different story. The room for error and correction is limited for someone who is 79. If you are doing right by him, you have to consider that.
You cannot discrimate due to age period. I underwrote for 18 years and was an mortgage banking operations manager which included managing the underwriting, quality control and compliance departments. If you use more stringent underwriting guidelines for elderly borrowers, you are breaking the law period. Of course, you would not want to see a retired elderly person on a fixed income going stated and I wouldn’t typically allow exceptions to ratios, asset or LTV requirements on this type of borrower. Maybe that is what you meant.
According to the National Vital Statistic Reports, the average life expectancy in the US is 77.3 years, then it varies from there depending on whether the borrower is male or female and of course there is the borrowers health history
etc.http://www.cdc.gov/nchs/data/nvsr/nvsr53/nvsr53_06.pdf
As a loan officer, I deal in A Paper but would never recommend an elderly borrower take a 2/28 or Option ARM or some such nonsensical ARM Program. Good points above for a loan officer to consider when placing an elderly borrower in a loan program. It all depends on the individual and their credit, income, asset and loan-to-value profile. No two borrowers have the same profile or financial requirements so one financing scenario (30-year fixed-rate) is not always the answer for every elderly borrower. But I do like the option of buying down the rate on a 30-year fixed-rate, although it can get expensive, escpecially in CA where the median price of a home is in the mid $500,000’s. The loan officer must definitely go deep into the borrower(s) profile and determine exactly what loan program would work best for him/her.
Here is an excerpt from
http://www.ftc.gov/bcp/conline/pubs/credit/ecoa.shtm
Equal Credit Opportunity
Credit is used by millions of consumers to finance an education or a house, remodel a home, or get a small business loan.
The Equal Credit Opportunity Act (ECOA) ensures that all consumers are given an equal chance to obtain credit. This doesn’t mean all consumers who apply for credit get it: Factors such as income, expenses, debt, and credit history are considerations for creditworthiness.
The law protects you when you deal with any creditor who regularly extends credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. Anyone involved in granting credit, such as real estate brokers who arrange financing, is covered by the law. Businesses applying for credit also are protected by the law.
When You Apply For Credit, A Creditor May Not…
Discourage you from applying because of your sex, marital status, age, race, national origin, or because you receive public assistance income.
Ask you to reveal your sex, race, national origin, or religion. A creditor may ask you to voluntarily disclose this information (except for religion) if you’re applying for a real estate loan. This information helps federal agencies enforce anti-discrimination laws. You may be asked about your residence or immigration status.
Ask if you’re widowed or divorced. When permitted to ask marital status, a creditor may only use the terms: married, unmarried, or separated.
Ask about your marital status if you’re applying for a separate, unsecured account. A creditor may ask you to provide this information if you live in “community property” states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington. A creditor in any state may ask for this information if you apply for a joint account or one secured by property.
Request information about your spouse, except when your spouse is applying with you; your spouse will be allowed to use the account; you are relying on your spouse’s income or on alimony or child support income from a former spouse; or if you reside in a community property state.
Inquire about your plans for having or raising children.
Ask if you receive alimony, child support, or separate maintenance payments, unless you’re first told that you don’t have to provide this information if you won’t rely on these payments to get credit. A creditor may ask if you have to pay alimony, child support, or separate maintenance payments.
When Deciding To Give You Credit, A Creditor May Not…
Consider your sex, marital status, race, national origin, or religion.
Consider whether you have a telephone listing in your name. A creditor may consider whether you have a phone.
Consider the race of people in the neighborhood where you want to buy, refinance or improve a house with borrowed money.
Consider your age, unless:
you’re too young to sign contracts, generally younger than 18 years of age;
you’re 62 or older, and the creditor will favor you because of your age;
it’s used to determine the meaning of other factors important to creditworthiness. For example, a creditor could use your age to determine if your income might drop because you’re about to retire;
it’s used in a valid scoring system that favors applicants age 62 and older. A credit-scoring system assigns points to answers you provide to credit application questions. For example, your length of employment might be scored differently depending on your age.
Virginia,
I’m with you on most of this. The exception power underwriters have is what I’m talking about. It can go either way. Officially, you can’t discriminate but it happens. Off the subject but something to defend what I’m saying. Five years ago, I worked for Aegis Retail. I submitted a loan(refi) that qualified for approval. What was being paid was 30k worth of back child support. The actual number was 60k but they were in negotiations to settle.
The underwriter called me directly to confirm this. Then she told me a story about how her ex-husband never paid his child support to her and then went on to tell me she was going to try her best to deny this loan because the title work showed that he was remarried and that the original judgment was for the ex-husband to sell the home and split the proceeds. She told me that she didn’t think him only paying 30k and keeping the house was right. What she thought had nothing to do with the loan “officialy”, but that’s what I was “unofficially” up against. The file was eventually denied.
As far as life expectency stats are concerned, the man should be dead. And so, if using those stats, then my question to you again is now what, since he beat those odds…….Put him in another adjustable and hope he dies before the new loan adjust? The L.O. should have done it right the first time.
I know its expensive in CA and buying down the rate can cost. But consider he is going to pay additional fees on his new loan as well.
The underwriters I’ve dealt with have always brought up “benefit to borrower” on deals like this. Because of age they will counter offer with a 30 fix or something more stable than what I submitted. It’s their legal way of saying we don’t want to do that loan but here is an alternative. We didn’t turn you down and if you don’t accept our counter then it’s not a denial but a customer withdrawl. No discrimination.
I’m sure if we had the entire story we would both agree on how the deal should have been structured. But from what is given, the age is a major factor on the direction the loan should have taken and I don’t see where that consideration was used.
Virginia,
The excerpt says great things but I know you don’t believe that discrimination is not happening on the underwriting level. Please don’t tell me that.
Virginia,
You’re kind of disagreeing with yourself here.
“If you use more stringent underwriting guidelines for elderly borrowers, you are breaking the law period. Of course, you would not want to see a retired elderly person on a fixed income going stated and I wouldn’t typically allow exceptions to ratios, asset or LTV requirements on this type of borrower.”
Al:
Investor guidelines for stated income borrowers typically (not in all cases) exclude retirees from elibible borrowers. These limitations are already placed on the loans by the investors and are not subject to the decision making of the underwriter…
I don’t know where your loans are being underwritten but in my arena, loans have been underwritten and approved based on the qualifying of the borrowers. If you have seen and/or experienced discrimination, I would suggest reporting it to the authorities.
Al:
Exceptions are granted, based on the overall strength of the file. Typically, the underwriter fills out an exception request outlining why he/she thinks that the exception should be granted. If you have a retiree with with fixed income and high ratios, low assets and high ltv, the exception would not make sense and would most likely not be granted. But if you had a retiree with fixed income and three million dollars in liquid assets, it may be considered. Please read the last paragraph of my post. You cannot make general statements and conclusions based on generalities because you will always find an exception.
Hi Virginia,
So if I understand correct, there is some discrimination written into the rules such as the case of stated income and retirees. I guess it could be argued that retirees are not absolutely limited to a certain age, but that’s a stretch.
Who is Aegis? Were they A paper or sub prime or Alt A or what? The name sounds familiar….they sound like they were subprime…..After reviewing the posts on this website, it is glaringly evident that the A paper world is totally different than the sub prime world, so what I may have experienced may not be the same as you. I have never in my life experienced an unethical underwriter, pompous and egotistical yes, but no one who would take a bribe or break the law. Our reputations are all we have and most of us would never put it in jeapordy….not even for a million dollars. But I agree, that we are pretty much on the same page…..
Al
my area of expertise was not with the investors writing the guidelines. It was with underwriting and compliance as a lender adhering to the investor guidelines and rules applied to our are of the business. If you wish to discuss how investor underwriting guidelines were written and what rules those guidelines were subject to, I would suggest finding someone with experience in that area of our industry (I am not referring to portfolio loans from banks, but to the loans securitized on Wall Street). I am only speaking to the area that I have experience in…..
From your 1:12 post
“You cannot discrimate due to age period. I underwrote for 18 years and was an mortgage banking operations manager which included managing the underwriting, quality control and compliance departments. If you use more stringent underwriting guidelines for elderly borrowers, you are breaking the law period.”
Doesn’t sound like much room for exceptions.
Virginia,
Sorry if I’m being difficult, just interested in some clarification. You made a very firm statement about discrimination, and you are clearly against it which is as things should be. However you then identify that retirees should not be in stated income loans which seems like a contradiction. It also seems to me that age is a factor in ability to repay. It’s hard to repay a loan if you expire before it does. Since insurance companies can legally discriminate based upon age for insuring drivers, then it seems not that much of a stretch that lenders would have some leeway as well.
Al:
As an mortgage loan underwriter, you cannot discriminate (See the ECOA verbiage I posted above).
“Doesn’t sound like much room for exceptions.”
Your statement doesn’t even make sense. What does “If you use more stringent underwriting guidelines for elderly borrowers, you are breaking the law period” have to do with exceptions?
I enjoy participating in intelligent, educational, informative discussions but it sounds like you are just trying to be contrary.
I posted before I read your clarification. Thank you. Underwriting for a mortgage lender is not the same as underwriting for an insurance company. Insurance companies use actuaries to come up with their guidelines and tables. In the mortgage arena, guidelines are provided by the investors who buy the loans. The investors develope the parameters of the loans they will agree to buy. They provide underwriting guidelines for the underwriter to follow when analyzing the borrower(s). In the guidelines is the section: Eligible Borrowers. Most investor guidelines exclude retirees from stated income products. That is not an underwriter’s decision but already pre-determined by the guidelines. The underwriter is not discriminating, the retiree is just not eligible for that particular loan product
Regarding the borrower dying before the loan is repayed: heck, any borrower could die before the loan is paid off. That is not a factor the underwriter considers when approving a loan.
Virginia,
Aegis Mortgage. It was an A-paper lender. Actually, it was set up to mirror CW in its operation except for the bank part.
And yes, anyone can die at anytime so that life expectency snippet doesn’t mean anything either, but a 29 year old has a better chance in paying back a 2/28 than a 79 year old. My arguement wasn’t about the discriminaton. It was about the bone head decision of setting the borrower up for a higher chance to fail.
It’s obvious, the A.R.M. didn’t work for him. So for the people listening, imagine what he is going through as he figures how he is going to get another loan to save his house. A bad deal is a bad deal wheter it’s A paper or B paper. It’s still a bad deal.
Great post! Thanks Chris, we are indeed on the same page….
Poppy,
Thank you Thank you Thank you.
I got so feed up with brokers and upper management bending over to cover for the crappy files I went into another field. If brokers were regulated like other professionals (CPA, Financial adv, etc) a good percentage of them would be in jail by now.
You should just be glad to have a job. Stop complaining. You are supposed to put the brakes on the deal. You are the gatekeeper. In every field on earth salespeople push the limits. Just say no and be happy to have a job because many do not. Get a grip. Furtheremore things are more complicated in an automated world.
I am glad to have a job, what pushed me out was when the upper managment would remove the Fraud from the file and say get new doc’s just so they would not upset the broker was the last staw. It happens more then you think.
Great article. I can’t tell you how many times I have received loans like this from an AE or LO screaming why can’t I approve this type of loan.
One of my answers is that I’m not in the business to approve loans that will be in foreclosure. Frankly if all borrowers were qualified as they are with a VA loan we wouldn’t be in this mess. Notice we have heard nothing about VA foreclosures.
Well said! Most “L.O.s just don’t have a clue. I’m kinda glad that the market is in the tank. It gives us long term professionals to do our job profitalble and let’s all the other part timers go back to their jobs at grocery stores, auto sales etc… I reccomend, do it right the first time, charge the fee that your worth and service your customer correctly. This is not brain sergery. Read the guidlines and follow the rules. Its not that difficult.
TO ANYWAY:
It is obvious with your attitude you are one of the those that do this type of loan. Every time an underwriter has to waste time with this type of crap it delays approvals for the borrowers that can be approved and for the loan officers/AE’s that know their jobs. ANYWAY if you are in this business GET OUT give us all a break..
Well DA,
What did you expect from an industry practice DOES NOT require Background checks on it’s employees. I know this because I work at a well known Bank that currently has a 38% fallout ratio on applicants who cannot pass a standard background check and all these applicants came from mid-size to small mortgage companies. Apparently the Department of Corporations in California (where I work) does not require S-Corporations to submit to any hiring background proof to them for monitoring. The whole Wholesale/Correspondent Lending industry some experts are saying have as High as a 30% ratio of people doing loans at these small (CFL License shops) do have serious criminal records but are allowed to work due to no background checks required. I just heard of a loan officer who submitted a loan to our company but was not heard from again due to his arrest with the IRS for tax fraud. Wow!
Poppy u r the bomb!!! I have been in the business almost 30 years and I always read your column aloud to the l.o.’s in my office. Just to let them know that we aren’t as dumb as they think we are!
So are underwriters the most ethical in the mortgage business?
What’s funny to me is that I keep hearing veteran LO’s and brokers saying that all the crap has been cleaned out of the industry and only the good guys are left. Yet when I speak with Poppy, she sends me these emails to post.
Personally, I think all underwriters should be able to flag fraud in a nationl database and then it is reported to regulating authorities to take immediate action. This seems like a simple and fast solution to combat mortgage fraud.
It is apparant that they have first hand knowledge of broker fraud, but are told by upper managemnet to not report this because of a fear to lose that broker shops wholesale busines.
To Anyway.
Get a grip. Learn the guildlines! If the borrower does not qualify under a paticular program, move on to the next. If there is no program available for your borrower, advise them with proper guildence, place them in database as a possible future deal and move on to the next! But please don’t submit stuff you clearly know is not going to be aproved. It just slows my pipeline down for quality submitted loans. Albertsons markets surely could use a good bagger or cart retrival person. This in America. Your allowed to move jobs if desired. No offense, just straight truth.
My personal favorites recently have been the SIVA products 10 yrs on the job and the employer ( some warehouse manager in Miami making $80,000/yr) never shows up on the credit- but KFC does!! Or the employer who’s having “phone problems” when you call for a verification the number is disconnected so the brokers send an LOE stating they are having “phone issues” and they are working with the provider to get it resolved. I think Brokers have gotten dubmer in the last year..if that’s even possible! Or maybe they think underwriters don’t look at credit or validate anything and just make decisions based on their word! I’ve been in the industry…sub-prime for 10 yrs and this is as bad as I’ve ever seen it! Fraud Fraud Fraud…lenders should tighten up and prosecute these people instead of putting them on a watch list!
And your paycheck is paid by whom? You job is to do what?
That’s right, the fees that are charged in the loan are what pay your salary, and your job is to be the one who sees the (fraud, bad ratios, unqualified income, credit concerns, etc.) and then make the “Underwriting Decision” to deny the file. If you want to cut down on bad submissions, then call your AE’s in for a little training, and then dispense them to their accounts to train these untrained LO’s on how to properyl (qualify, submit, price, etc.) FHA loans. Remember, your AE’s are the front line protection for your from these problems. And while there will be plenty of stupid brokers out there who will always submit crap, it is your job to sift through it and find the “Gems.” So with less than 500 FHA Secured loans funded since Bush rolled this program out, you’ll have plenty more to go through. So grab a shovel, and stop whining.
Norcalbroker, isn’t your job to train LO’s to not submit crap? Isn’t you job to make sure the LO sifts through the crap before it is submitted to underwriting? are you saying that is an AE’s job?
Well said Poppy! I gave up in August of ‘06 after 30 years as a Senior
Underwriter – just got plain sick of devoting my life to a job that my employers really didn’t want me to do. If they had, as they used to back in the 80’s and even the 90’s, this huge mess would not have happened. The lenders caught the “greed” bug from those big bohemoths, i.e. Countrywide who, “pushed the envelope” and taught the brokers and other lenders how to wring every penny out of their employees, the market and finally the economy, thinking “outside the
box”. Those underwriting boxes were developed by actuaries who created them to price risk! It used to be the underwriter’s job to assess a loan file to find balance in and around the box, but that went out in the
very late nineties. What a surprise that, since most of the big players in the lending field don’t have a college education, that the value of the
risk based pricing has been ignored for so long. Thanks so much for
ruining an industry that used to a pretty good job of self regulation.
Greed, pure greed, at all levels of corporate America.
You go!
This is great…I thank you and admire you.
Having been in the Industry for 30+ years….it is enlightening.
No, my office is a small shop that I quality control, so it’s not an issue for me. But when I was working on my brokers license I worked in Large offices…50+ LO’s. and there was NO Training, no real support. Most of my product knowledge came from great AE’s and personal studying. I am not putting the responcibility on any one party, there will always be garbage LO’s out there (even with National licensing, that will not change) all I am trying to say is this:
1. As an underwriter you job is to approve / deny files that are submitted, no?
2. If you are fed up with the same problems happening over and over, then there is probably something your AE’s can do in the field to help curtail this.
3. There will never be a day when an underwriters job is to rubber stamp loans, so to expect for all your loans to sail past your desk is incredible.
4. there will always be bad loans coming across your desk. As someone with that much experience, you should be more than used to it. This is not the first difficult market with people thowing loans up against the wall, nor will it be the last. So get used to it and stop complaining, especially when your a salaried employee…IT’S YOUR JOB!
“4. there will always be bad loans coming across your desk. As someone with that much experience, you should be more than used to it. This is not the first difficult market with people thowing loans up against the wall, nor will it be the last. So get used to it and stop complaining, especially when your a salaried employee\’e2\’80\’a6IT\’e2\’80\’99S YOUR JOB!”
TRANSLATION: Oh, there’s nothing wrong with FRAUD — fraud is NORMAL. EVERYBODY HAS FRAUD. Don’t complain or draw attention. Just do your job as usual.
You gotta be kiddin’ me — it’s attitudes like that that are part of the PROBLEM.
Remember, you’re either part of the problem or part of the solution.
Call me ignorant but I can’t believe that brokers and lo’s submit crap like described above. I have been a lo for 7 years and just got my brokers to open up my own 1man opperation. I don’t and will never understand why these crooked lo’s, brokers, ae’s and others have not and will not be prosecuted. If this was any other kind of fraudulent activity, these people would be fined and thrown in jail! Why can’t the people who can do something about this see the PROBLEM here???
Frankly it makes me sick that I, as an honest and hard-working broker, have to compete against these slime balls that call themselves loan officers and brokers! For all you brokers and lo’s that say its not your job to decide if the borrower qualifies…You are a moron and should be working at McDonalds!!!
norcalbroker,
It is obvious, to me anyway, that you miss the entire point from what you say on 1. The point being made, and a real good one at that, is this. If you do the math yourself and see that is will not pass then don’t send it along. All your other points and any effort you have made to back your argument are immediately lost. Your credibility is ruined from the outset. If the loan is questionably on the border line then go ahead and submit because that is then their job to look at it. All the garbage coming through means no one is looking at them before submitting and just passing them along. Stop this! Just pass what is border line and /or that you feel will pass after a thorough review and leave the crap at the door…
Wow, whining like a 3rd grader.
Grow a set of balls and deny the POS and stop shining already.
All of these: Stopy whining posts?
You guys know who are posting them, don’t you?
It’s the fraudsters themselves.
See, they never want anyone to say anything about it because it’s supposed to be okay. If too many people start belly aching then things might — GASP AND SWOON – change.
That is why you get the condescending, stop whining remarks.
As if to stand up for the truth and for integrity could EVER be considered whining?
Only a very dishonest person would say that, someone who’s used to getting over, someone who likes to say, Oh, Commmmme Onnnn, EVVVVERRRYBODY does it.
EVVVVVERYYYYBODY does NOT do it — it’s not NORMAL, or okay, and it’s not up to Poppy or any other underwriter to clean up the trash that others keep submitting.
It should be clear that this practice needs to STOP– how bad will it have to get, damn?
Wow! I am hearing a lot of anger and finger pointing. I think each side has a valid point, but name calling and telling people to go “bag groceries” is just an attempt to hurt people’s feelings. I was an AE for a long time and my wife was an underwriter for even longer. I was known for thoroughly looking at my files and not putting up with BS from my brokers, however as the market started turning down, fraud became rampant. Yes, there are some AEs who turn a blind eye in order to fund one more deal, but for us that tried to keep the quality of our loans intact, the prevalent fraud was out of control.
It is easy to be angry at AEs because they are the ones bringing in these “crappy” loans plus they are the ones making a lot of money. But I believe that if you put an underwriter (even with 30 years experience) in the position of AE, you would see the same loans coming in. That’s why lenders hire underwriters!
You’re all missing my point…
There will always be crap sent in because people are desperate. Whether it’s a 100% commissioned LO with no reserves trying to force a 60% ratio’d file though on a hope and a prayer, to the total and complete fraud file. I am not condoning fraud, or sending in crap to begin with. My office has a 80% minimum submission to fund ratio with all of the lenders we use on a regular basis, so we don;t constitute the above problem, or are “fraudsters” as previously hinted at. My point was that regardless of the quality of the file, one of the underwriters duties is to be the gatekeeper to the approval. Deny and move on, and if it is a consistant problem from specific brokers, get your AE’s involved. I am in no way admonishing responcibility from the broker / LO…but it is the job of the underwriter to deny the file.
And for everyone cheering on this article, from the brokers perspective the best way to shore this problem up would be to deny the file right away and not put up with the incessent whinning of that particular LO and get your manager and/or AE involved. Complaining about having to do your job in this market is a little lame, be happy you have files to work on in the first place.
Your tenor sounds like you are upset and mad that you have to sort through the details. I think that you can disapprove of a loan without the rants and upset at those who are also trying to create a living. Education is the foundation and that accepting others lack thereof does not make you any smarter. If you do provide the guidelines in a most tactful manner you will probably have a better pipeline.
It not just the brokers or the LO’s that are slick. I just got a set of tax returns from a borrower for 2 years that were fifty pages long. I smelled a rat as soon as I looked at the first page where it did not say copy. then went to page two and saw self prepared. I called the client and questioned them and got nothiung but slience on the other end.Needless to say I withdrew his file letter about a half hour later.
As far as the frustration with FHA, DTI is going to be the biggest poreblem moving forward to get people to qualify for that loan. The past five years many have used their houses as ATM’s and continued to rack up debt even after they cleared the decks. Well it is here now no more inflated values and no more 50%DTI what are they going to do now?
If you are aware of fraud … you can report it to HUD’s OIG Hotline:
— 1- 800 – 347 – 3735
— fax: (202) 708 – 4829
— e-mail: hotline@hudoig.gov
— HUD Office of the Inspector General Hotline
451 7th Street SW
Washington, D.C. 20410
Thanks Poppy
As a vet Underwriter of 25 years and a Licensed Loan Agent I have watched the beauty of the business go down the toilet. I’ve indured refi booms, downturns and loans from frick and frack but it’s disgusting that quality loans became a numbers game and has cost us all regardless what position or where you stand in this industry.
Kevin,
My only point was that it is an underwriters job to say no to a deal. Yes a salesperson should not submit something unrealistic or stupid or that does not fit guidelines but the world is not perfect and borrowers do not all fit into neat and tidy places. I have always known my guidelines and ran a team for a large mortgage lender and my deals were straight on the front end and the back end. Underwriters should also drive the behavior of their team members and not underwrite garbage loans. And yes people should be grateful to have a job and any job for that matter. A job does not define who you are. The character of oneself makes the person.
Brilliant article. It’s one of the things I’ve been saying for some time. The subprime days are gone! Brokers and lo’s are going to have to change their business models, adjust sales goals and create new marketing plans (find “new cheese”) if they want to survive in the current climate. This is where the licensing and education of loan officers is important. If lo’s in todays environment will not or are unable to adapt, then they’re going to starve. I can appreciate the underwriter’s frustration, as I underwrite for the lo’s in my shop and get frustrated with thier questions and dare I say…stupidity; and being a underwriter myself, I approach my personal client(s) file submissions from the u/w standpoint and make sure everything adds up and fits in the proverbial box and constantly submit a complete file.
Its not surprising to me, however, that fha has become the “dumping ground”, considering all the bantering about fhasecure, how the government is going to provide relief, and even local radio spots claiming to have a federal government backed “subprime relief” mortgage.
What most subprime lo’s fail to understand is that FHA has much tighter requirements and guidelines than even fannie/freddie, let alone subprime (which is non existent at this point). Yet, for some reason, people seem to think that FHA is the “new subprime”. Until fha offers a stated income product, it will never be able to replace what subprime did.
Thanks Poppy for looking at this correctly. Curious which shop you work in OC with your John Wayne Airport reference. For any HMC/LO who thinks its right to push this muck into the system: hurry up and quit the business. The less of you the better for all.
No underwriters have answered my question.
Are underwriters expected to just deny and turn the other cheek to fraud? See no evil, speak no evil, hear no evil?
Good Job!
For all the Brokers and A.E.’s who read this and are still in denial; you won’t be for long. As an industry, the faster we flush you out, the better for all concerned.
Either learn the business (most of you never did) or get the ___k out! Most of you came to the industry because you heard about the money you could make; you should have come for a career.
Once you learn the business (if you can), you will need to have the courage to train the Broker and turn the loan down before it goes to U/W if you know it does not meet the guidelines. Oh, did I mentiion “learn the business.” Read and get to understand the guidelines. Ask questions. Be honest. Work hard. And, you can still make a good living in the Mortgage Industry.
Underwriters just need to keep doing the job they’re paid to do, assess risk, so just keep declining the bad loans. The companies themselves should ultimately do the math. AE’s and brokers that submit loans that can’t or don’t close are a financial liability and ultimately will be gone.
I can certainly agree with the article that it takes too much time to deal with loans that are not worth everyone’s time or effort. I don’t think that you have to have a college degree to do loans, because I don’t have one and I’ve been processing loans for the past 16 years. I think that you have to have a conseience to do loans and do them correctly. If you wouldn’t do the loan yourself, why would you give the borrower a crappy loan. I think the industry is to blame for the downturn of the past year. If a borrower has a 500 credit score wanting a 100% loan and stated income then I would be a little skeptical that the borrower would be able to pay the loan back. Not everyone should get a home loan, there should be certain guidelines that each borrower has to follow.
Michael Hayes:
I’m afraid that the decline in the mortgage industry is having the opposite effect of what you are desiring. I think the best and most capable people left, or are leaving the industry. Soon, all that will be left are the people who either do not have the education or the ability to find another career.
To moe
Different companies have different tolerances and procedures for fraud. I have worked for lenders that just turned down the deal and moved on. Other companies would put them on a watch list and if they submitted more fraud ( which was caught ) then they would be cut off. But never have I worked for a lender in over 10 years where they actually prosecuted the brokers. They say it would cost too much money…which is what closed fraud files do..cost money! The company I am at now is a small correspondent lender and they will actually threaten the brokers with prosecution, but I have yet to see a followthrough with that threat. My sole job at this company is fraud prevention/detection. I review the files before they are sent to the MI companies for a decision and do final audits prior to funding and at this point we are at a 20% closing ratio of files submitted, most of the fallout is due to fraud.
There was a time when lenders and underwriters loved crappy deals, so get off your high horse and try to find a way to help borrowers who were suckered into bad loans.
Moe,
when property values were sky rocketing, wall street wanted to cash in. That being said, there was a blind eye turned to fraud on ALL levels, from origination through appraising through underwriting through securitizing and through the rating of said security(ies). Now, as we collectively suffer through the meltdown and implosion, it’s being found out that fraud was more prevalent than thought. All in the name of greed.
Now, the spigot has been shut off, and everything is being looked at through a microscope. Fannie/freddie are primarily the only ones left purchasing mortgage loans, and they’re dictating the rules. I’ve got lenders everyday telling me how they’re losing programs faster than ever.
Bottom line is, those with the money are going to make damn sure that no fraud has been commited.
As far as your question, Moe, I can only speak for myself. If there’s any fraud commited by the client, i immediately decline the loan, and then discuss with my lo. if i find that my lo created the fraud, immediate decline of loan and immediate termination of lo, period. in my scope of duty at my company, it’s my duty to q.c. the file before any of my lenders receive the package. i’m not only out to protect my client and my company, but also my lenders.
Moe,
and no, fraud should not go unpunished ever…on one instance, i’ve contacted my state’s atty. general, and that lo was none too happy with me. i run a clean shop and that’s why we’re still in business!
Thanks Heather and Mi.!
As a Broker it really sucks that we get lumped into one category. I have worked very hard to get where I am today and take pride and have intergerity in my company. A lot of these “Brokers” that you speak of hold CFL licenses which is much different. They run these sweat shops and are in it to make as much money as possible and as quick as possible. The LO’s aren’t qulaified, haven’t done any schooling, are basically telemarkerters calling up people and trying to get a deal. I have actually seen the crappy side of retail steal deals from me and not discloseinformation they should of. I had a miliion dollar deal with a company, that I won’t mention there name, but have since been bought out, deny one of my files for no reason- really good file. The Realtor in the deal then went to the retail side of the same company and they said no problem, they could get the deal done. To
help out my agent, I sent over all of the information to the retail rep and she purposely didn’t disclose a payment they had on their other property, because it didn’t show up on there credit. She got the deal closed in 2 weeks and made me look like an idiot to my realtor. Why don’t we hear about these types of stories? Becasue no one wants to blame the
actual Lender for doing the deal, when they in fact did them.
This is a general comment towards the industry and should not be named at “brokers”. I cant tell you how many loans that we could not do as a broker either for ratio’s, credit, or bad ss#’s that ended up with an “institutional lender” since they do not check basic ss# information.
FHA is a dumping ground always has been! The market pays the biggest rebates and commission on this program, and takes the lowest FICO’s, highest ratio’s, and easiest allows 100% GIFT (abvious it’s the seller) down payments. This business needs a major CLEANING UP this means originator’s, underwriter’s, realtors’s, and appraiser’s. FHA also needs to minimized rebates so as not to make is so EZ to rape borrowers. 3% rebate, 1 Orig, 1 1/2 dicounts, plus SRP’s, is a normal FHA payday.
Poppy stop being so righteous!
I am sure you looked the other way when you were doing SIVA and SISA\’e2\’80\’99s. Not to mention No Ratio loans to hourly paid borrowers. Underwriters are just as much to blame for this mess as everyone. I am sure that all operations staff from underwriters to receptionist cashed in Bonus Checks in 2004 thru 2007 with all those 100% SISA loans that were made.
just one question 28….how much cashin in did you do because of said loans?
i admit, i originated my share, but not at my borrowers expense. if the loan didn’t make sense for my client, i did not push that product. if they did not fit into a product, they didn’t get a loan, period. its how i sleep at night.
This is such crap, why can’t they be reported for fraud or put on a watch list with the rest of the company! Anyone who thinks about photoshopping a document needs to get their approvals yanked.
These are the people that need to leave the industry, if you can’t figure out how to calculate full doc income get the hell out! I can train my lab to do that.
I talk to probably over 30 right now before I actually get a loan to submit, but when I do its a good loan.
Anyone who’s not FHA approved, DON’T DO FHA LOANS. There’s not legal way to get a referral fee (unless on a reverse). GO work for an FHA shop if you want to do them!
EDDIE V is a fool!
No Ray, you are the fool! You are obviously not on the inside when it comes to seeing the future in this industry. I know in California the Department of Corporations and the California Lender’s License Investigative Division has already NOTIFIED Hundred’s of small and mid-size Lending Sweatshops, that mandatory audits of background check’s for there employees will have to be submitted in the coming months to see exactly who is working in our industry with shady backgrounds. Any company hiring people with CRIMINAL CONVICTIONS will have there licensed suspended or possibly terminated. GUESS WHAT, many of these shops are already running for the hills and scrambling to weed out the garbage! All I can say is LOAN OFFICER WANTABE BEWARE!
To whom..
Quit your complaining and get back to work. I deal with so many processors that comlain because they have so many files and are so on edge all the time … so if you don’t like your job then quit!!!! My god it doesn’t take a rocket scientist to figure out that most of the hard loans these days have some sort of fraud attached to them … so just shut up and do your job like your supposed to, not picking files that you like and don’t like …. just doing your job!!! LO’s who committ fraud on loans will get what they deserve eventually, but I don’t think it was in your job desrciption to bitch and moan if loans are coming through with fraud attached … just do your job, which is to look at files and push them through or decline them. If you don’t like it then go back to Walmart!!!!!!!!!!!!
“BP, can you please report to the Deli Department. BP, please report to the deli department — and get off the company computer”
Frankly I am surprised to not see more posts by processors. Typically
owners of mtg. broker shops waste none of their precious time training
their loan officers. It has been a common practice for years for loan officers to hand off a file to a processor and the processor was expected to figure out how to get it done, where to get it done and throw it against the wall at as many wholesalers as possible until one finally said okey dokey. Then and only then were they to process the file to only what the UW required (or AE on a pre-grade) and told by their bosses, don’t you dare verify anything more than that. At the end of the day, who got the bigger pay check? Of course every one wanted in on the action as a loan officer.
And for those of you who think licensing and continuing ed is the answer, think again. Anyone can pass an exam after taking a cram course.
Licensing only prevents those w/ past criminal records from getting in. Once an individual gets in and for whatever reason they decide to step over the line in commiting fraud, they will continue to do so until caught and prosecuted and thereby automatically placed on a national list should one ever be put in place.
And yes, I had an experience where a wholesale lender did not
want to know about fraud. We had the loan locked/reg. with a company (out of business now of course) that we ended up never even submitting the deal due to DTI based upon a completed VOE. My competitor (who just happened to be my former employer) got the deal done w/ the same wholesaler and when I smelled the rat, I called the HR dept. and
spoke with the verifyer who admitted the loan officer from the other company peronsonally brought their VOE to her and that how she filled it out for them vs. us was none of my business. When I confronted the
wholesaler and provided them my VOE upon their request, they did not call me back as promised and never returned any of my calls. That was the last deal my company sent them.
A more recent case was a deal my company declined based upon a completed VOR for the current address that stated the borrowers were past due 1 1/2 mo rent and had been running past due this amount for the past five months and were now 2 1/2 months past due as of the date of completion of the VOR request! When the loan officer confronted the borrowers they said their realtor was aware of this (apparently turned down by someone else before us) and was sure their realtor shared this with us. When we confronted the realtor, he confirmed he knew about it but was sure the borrowers told us up front and figured we had a way to get around it! To make a long story short, a competior mortgage broker
got the deal booked (FHA no less, same exact way we had the deal structured) and I hoped and prayed it would be a first-year delinquency.
I called the landlady after I found out it closed and she told me they never paid the rent current until the day they moved out and she never completed a VOR for anyone else. (the AUS required a 12-month VOR)
Naturally that was the last deal we got from that realtor and anyone else in that realtor’s office. You can all say, we are probably better off but my
point is, had we ratted out to FHA there would have been that little thing called “prior knowledge” and in so ratting out the loan officer and the mortgage broker he worked for, so too would the realtor have been ratted out and one realtor flapping their gums to every other realtor in the county about our self-righteousness would have helped my company how?
Some of you will say that makes me part of the problem and on a small scale you may be correct. We will continue to lose realtor business because we won’t “figure out a way around it” but you can imagine had we dragged a realtor into it, it would have been made to only sound like sour grapes on our part—-we would have been made out to be the bad guys who take down realtors!
The first and best defense against fraud, is an honest, seasoned, professional processor and only if that processor is on board with a broker (lender, loan officer, banker) who shares that same sense of what is right and what is wrong. Afterall, regardless of how lazy the broker is, at the end of the day, they are accountable for every loan officer that works for them.
A seasoned processor underwrites the file before it ever gets to the wholesaler’s UW and I agree that only in those cases where the deal is borderline, should the wholesale UW ever be bothered. I hear day in and day out from UWs “you just can’t believe the #$%& we have to waste our time on” including files that are not even put in any stacking order to the even more common complaint today-”too many brokers think FHA is the new subprime, if only they would familiarize themselves with what an FHA loan is”———–and turn times go to crap while good deals on good borrowers submitted by good brokers sit in the que.
As I see it, underwriters should be our professional friends and collegues-they can only become such after we both in turn, earn the other’s respect.
I have been in the industry for a long time and I have worked as an LO, AE, processor and then and underwriter. To be honest with you a lot of the problems were because of people above us. It was a lot of people being told what to do and they did it to make money. No one really thought of the end situation.
Unfortunatly I agree from both sides. It is an underwriter’s duty to look at the file and say NO (and have someone back them up on it which is few and far between) There were a lot of loans I would say No to and someone else would say YES….. AHH… But at the same time from a broker LO standpoint if you know it’s not a good file don’t send it in. Really you are just messing up your borrower more and creating more of a problem for everyone…
The mortgage play falls on everyone and instead of saying you do this I do that – You would think you would work together to get thigns through. Be educated as to how things work and why your borrower’s ratio’s are jacked instead of saying “who cares” and someone ( underwriter or AE) should be educating people on the ratio configuration.
In a world with minimum total education and lot’s of money the best you could do is at least learn how to do your job well…
Thank you so very much for this posting. So unfortunately true.
Here is the bold and undeniable truth – SALES RULES. I can decline these loans ad naseum, and do, and for mi.mortgageguy – I declined the holy living &%$k out of the SISA’s and SIVA’s that were not supported, did not make sense and that were flimsy attempts at confirmed fraud.
The upshot is that the Broker and the AE rule, they complain and our hands are whacked with the corporate ruler. Never mind I never said what they have purported I said in their complaint, that is not germaine, SALES RULES. Worst of all we are disposable – there is another underwriter out there that will approve this garbage, did approve this garbage – and will get your/our/my job when they are tired of not being able to co-opt and control you, and, recognize they never will be able to. The only satisfaction that I get from the “other” underwriter is that those companies that replaced me with the “other” underwriter, are, closed.
Now for the Training issue, I have tried, and tried, and tried to get the Broker and AE to pull down a copy of the 4155 or use the FREE AllRegs on the e-FNMA site. At this point I secretly think they are for the most part, shhhh…..illiterate.
I have explained until I am blue in the face, politely, why an appraisal in an Urban location can not have comps 1.5, 2.0 and 1.2 miles away with sales dates from 01/07, 03/07 and 06/07 in Phoenix, AZ, appraisal date 12/7/2007. I do not even try to explain Bracketing and other esoteric issues that comprise an appraisal any longer, the few brain cells that I am speaking to would implode under the duress.
Every “real” underwriter reading this understands, we are exhausted, beat up, fed up, sad, betrayed…..to many adjectives to describe how we feel. We love this industry, we got into it to HELP people and our community, now we are experienced risk managers and analysts that no one wants to listen to……that DOLLAR though, speaks volumes. We all have been in it to long to leave it, and to long to want to admit that it has all gone to the rats that purloined the real spirit of the the industry. WE ARE A COMMUNITY SERVICE INDUSTRY. We still in our folly believe that the industry will come around and return to the normalcy that supported the industry and community that we serve for years and years prior to this insanity of the last 4 years.
For those of you who are in shops where it is getting/gotten better, I am so glad for you, so glad that there is a glimmer of good returning, albeit I am afraid way to late in arriving.
One more thing for the fellow who mentioned that FHA is more stringent than FNMA/FHLMC, sorry – you ought to see what we are doing to FHA with the blessings and by the requirement of management. God help FHA, they are going to have a debacle on their hands here in another 24 months or so and we the tax payers will be bailing their rears out of the mess right about the time Option Arms are belching their venom on the market. No, I am not the class favorite presently – I am an oldie, but moldie in the FHA credit analysis game, just because the manual sez 12 months 0X30 – don’t mean the prior 12 months can be littered with 4X30, 3X60, 2X90 and one 1X120 (mortgage credit ratings). The modern FHA underwriter apparently feels that the aforementioned is Okdokey, much to my chagrin. Damn I have so much to learn in today’s mortgage world. OMG are there really two g’s in mortgage?
Yeah, I think it came from the higher-ups, too. Back in 05/06 I was in meetings, and told not to trust my gut. I was told on stated deals, if they signed the application, then that’s what they make. I was told (and a bunch of other UW’s, too) by EMAIL to not use any tools (such as realquest.com, mapquest, public records, salary.com, etc. to validate a file. Also, before we could put a quality control review we had to get our branch (production) manager’s approval. What a f’ing joke! But yes, I cashed all my bonus checks from 05 & 06. So am I to blame? I guess so.
I think if you add stated income to the mortgage process you’re just begging for fraud. I mean, c’mon, where do you draw the line? When we finally had to use payscore and salary.com to “verify” stated income, it always seemed like it would be in the 90th percentile, or higher. (I have no idea why.) I work for one of the GSE’s now. I’m just glad to be employed. My previous employer closed last summer, and we were getting a lot of crap files during the last year, but during the last couple months there the bins were empty, and I was grateful for almost every file we got.
Speaking of fraud, I remember calling on a written VOE since the bonus income was written differently from all the other income. Turns out the $12,000 bonus was actually somewhere around $1,200 and this blew up the ratios. The processor from the bank seemed to have no idea about this (maybe the LO did it?), and she still really wanted to close the loan! After review w/ the branch manager they weren’t even placed on the watch list. I don’t know how much more blatant you can get, except maybe for the nail technician that made $220,000 over the past 2 years according to her W-2’s (I added a condition for a signed 4506T – I don’t think I ever received it).
by definition, stated income is fraud…how about the easy answer…no documentation…mitigate the risk with credit (score, history, trade lines, etc.) ltv, and by adding .25 – .5 to rate.
Let’s take a look at true no doc loans from a different (lending) perspective:
the big issue is insurability…what makes a loan insurable…if you have a stated income loan, you’re asking someone to “state” an income (usually the lo, to make the deal work to get paid)…
here’s what you have (hypothetically) 745 fico, 8 trade lines dating back 10 years…refinance 85% ltv…
and let’s say the guy works the register at Walmart & makes $9000/month…just to make the deal work…2 months later it goes into default, thus triggering an audit…they find that the income was GROSSLY overstated, he really makes $9.00/hr…
fraud associated with the loan and loan is no longer insured….
instead of stated, use a true No Doc loan, where guidelines of the lender do not require any verification. higher risk? sounds like it…but…the insurer(s) understands the loan type and asses the risk, which requires a bigger hit or add-on to the rate…now same loan goes into default, and an audit of the file is done, and it’s found out that the guidelines did not require any documentation, therefore no fraud was committed!!! loan is insurable…a true no doc loan really is as anti fraud as a full doc loan…just have to assess and mitigate the risk associated with the loan a little differently..
believe me, in lieu of blatant fraud, which is a stated income loan, true no doc is the answer…but unfortunately is not seen as such…stated loans will forever live on..i guess the industry will never learn
Dear everyone,
AE’s, LO’s, and UW. everyone plays a roll in approving cruddy loans including you UW’s that complain that management bent over for the broker or AE. Fact is, if you have/had a problem with it you should of gone above your manager. there are such things as regionals, HR ect…but didnt want to lose that job or paycheck did ya. Stop blaming everyone else, we all played a role in this current sitaution in the industry!!!! Work together to create the best loans possible and it is everyone’s job to weed out FRAUD!!
Couldn’t have written it better myself.
poppy,
in your post (56) i think you were meaning to address 28years? I’m in complete agreement with your article.
I noticed that after the fact…..and yes you are correct. I never expect as much response as I seem to get when these get posted. It also never ceases to amaze me that just about everyone of the detractors thinks that I got bonuses, spiffs, whatever for underwriting. Never got one, would never take one. In fact those in the A paper world for the most part never saw one of those compensation packages, at least the folks I know, however in the sub-prime world…..so I guess we know where the detractors may have oozed up from.
You know I have nothing against sub-prime, started looking at it in the mid to late 90’s when we graded it and required money down (novel idea) and complete verification of income and assets (another novel idea). The methodology and risk models were sound and the borrower was not set up to fail, which I am afraid was the case with this debacle we are witness to. Now I would just like to know who, is the beneficiary of the failure in this case, certainly not any of us left in the business, good or bad.
I wonder, outside of the money – who really did benefit from all of this and in what fashion?
Poppy,
For your question of who benefits from the failures the answer is everyone and no one. In the short term, everyone benefitted. Borrowers got homes (they couldn’t afford), people in the industry got paychecks/commissions (they didn’t deserve) and lenders got sales (that didn’t exist). In the long term everyone suffers. Borrowers lose their homes, people in the industry lose their paychecks and lenders take writedowns and have to seek money from foreign investors. The CEOs still win regardless of what happens, but that is another discussion.
Al,
you are right on…and i look forward to the ceo discussion…
Poppy,
anytime you post any type of article suggesting any kind of broker/lo fraud, you’re going to get responses…and a lot of them…so keep them coming, as i for one enjoy sharing my opinions and experience(s)
Poppy….
As I sit here reading this all…I want to “hug” you. You may not know it but you are speaking for thousands of us out here who have learned to keep their opinions to themselves. I, like you, can’t keep my mouth shut…I guess that is why I am not working right now!…Not only have I been on the underwriting side, but in Credit Risk…We know too much! And it is a bad nightmare when you have to tell Closing Managers & Funding Managers that they cannot forge signatures or change documents\’e2\’80\’a6
Or have a processor or AE Manager threaten you with \’e2\’80\’9cglassed over blank eyes\’e2\’80\’9d. Or come to work with a threat written on your desk calendar because you would not sign off on a SIVA, when the tax returns that were in the file clearly showed they did not qualify.
These are all reasons I was laid off from my duties of underwriting. (And yes I went over my Manager\’e2\’80\’99s head with this one)\’e2\’80\’a6.only to be let go as a \’e2\’80\’9ctrouble maker\’e2\’80\’9d.
In my opinion and history….this is how I see it.
Remember 15 years ago? Credit Risk was not \’e2\’80\’9ccontrolled\’e2\’80\’9d by Sales. Reputable companies had training programs and the bottom line was to provide homeownership to people in the communities\’e2\’80\’a6.which was an overhead expense that was dropped.. Somewhere in the process over these last 8 years especially, Sales convinced Corporate that they were being \’e2\’80\’9cpicked on\’e2\’80\’9d and they could not compete with other companies. More and more \’e2\’80\’9cinexperienced\’e2\’80\’9d sales people, processors and managers were being hired.
Experience was a \’e2\’80\’9cbad\’e2\’80\’9d thing, they wanted to hired new faces so the \’e2\’80\’9csales\’e2\’80\’9d team could train them the \’e2\’80\’9cright\’e2\’80\’9d way. I quickly became aware that these people did not have the structure of Integrity that we grew up with in the Industry\’e2\’80\’a6.it all became about the money.
So you keep on believing in that which you are such an expert in\’e2\’80\’a6.it has to be a hard win battle out there right now\’e2\’80\’a6I wish you well!
mi.mortgageguy … the answer to your question in post 46 is “none”.
A point for all … i find it very amusing that the often used argument for rationalizing fraud on stated income applications is that the lenders offered stated income programs and it was up to the lender to “catch the fraud”. However … there is no legal support for this argument … the legal definition of fraud is “a false representation of fact — whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed — that deceives and is intended to deceive another so that the individual will act upon it to here or his injury. The common definition of fraud is “the crime of cheating somebody: the crime of obtaining money or some other benefit by deliberate deception”.
Fraud must be proved by showing that the defendant’s actions involved (1) a false statement of material fact, (2) knowledge on the part of the defendant that the statement is untrue, (3) intent on the part of the defendant to deceive the alleged victim, (4) justifiable reliance by the alleged victim on the statement, and (5) injury to the alleged victim as a result.
The relationship between parties determines whether a statement is fraudulent. A misleading statement is likely to be fraudulent when one party has superior knowledge in a transaction, and knows that the other party is relying on that knowledge. Misleading statements are fraudulent where one party exploits a position of trust and confidence, or a fiduciary relationship such as those between attorneys and clients, stockbrokers and clients, and mortgage brokers and lenders.
Bottom line: fraud is illegal. Federal and state criminal statutes provide for the punishment of persons convicted of fraudulent activity. Fraud violation of banking laws are subject to federal prosecution because of the mail and wire fraud statutes.
So … what is a mortgage brokers legal responsibility … to state accurate and complete information on the 1003 … not some “fairy tale”.
I’m certain that all would agree.
Bigcityloans,
I agree completely 100%. The problem is…when there’s a commission involved, your typical lo is going to push the envelope to get paid, end of story. It’s sad, but true. Most lo’s do not care about responsibility, only about getting paid, and accurate and complete information could result in loss of deal…Again, I’m on your side, but i’ve seen the “underbelly” and unfortunately, it aint pretty. Yet, in all fairness, there are supposed to be checks and balances in place to detect fraud, on all levels…and unfortunately, in the name of greed, many, many instances were overlooked…again, sad but true.
Very well said Poppy… You just described a typical work day for the last 7-10 years.. Hopefully this will all go away and integrity returns to the industry.
I am heartened by the production professionals and support professionals responding to this post, Thank You. I mean that, it gives me hope after a day of slogging through this crap that I get to analyze.
You are all correct the SIVA, SISA & No Ratio Products were FRAUD the day they came out of Product Development and Risk and offered to “wage earners” with the 80/20 Combo mechanism and relaxed decisioning requirements (only follow the guidelines mandate, forget prudent decisions).
When they were first developed by World in the 80’s the thought was 30% down and state the income, verify the assets. The typical consumer using that product was Self Employed, not that they did not allow wage earners, but it was a sophisticated product priced with the risk model considered. The cost was high enough in rate and price that the average wage earner used the Full Doc product, additionally he/she did not have the funds to come to the table with 30% down. At that time the rates were also significantly higher than we have had in this “artificially manufactured let’s stimulate the market era”. We had a real time relationship with rates and documentation as well as the required investment.
This whole tragedy has been driven by more than just greed and avarice, it is a “market of smoke and mirrors” with so many convincing themselves that they are justified and entitled, to hell with the consequences.
Fraud has always resided in our industry, just not to this extent, now I sense that has become a “normal course of business”. There is in my book little fraud and big fraud, most of you will disagree with this weird view, but I have had to come to terms with the reality of Fraud.
Little Fraud for example, is the “sin of omission” -”Golly, yeah he was divorced, he had a child support payment, but you can’t find it, so how did you?”. No I can not find it, unless I am in a State that reports that stuff on the Title Report – a lot do not. Am I aggravated when I do discover it on the paycheck stub, you bet, but do I decline the loan; the borrower still qualifies ’cause I am good at finding income that is ligitimate, or do I penalize that borrower ’cause his LO is a P*&%k. Aha, here is the dilemma, I am really concerned about the borrower, first time home buyer – how was he to know that he had to spill his guts about that little number. No, I take the borrower’s side and do the best I can give the P*&%k of a LO a walk and get the proper documentation and move on. The LO of course is furious that I dug to deep, idiot it was on the paycheck stub, and lets loose with any number of invectives and threats, yep he is a P*&%k (sorry guys, never had a woman LO pull that one
). Loan still approved and closed.
Now for the BIG Fraud – complete Tax Returns -2 years mind you reflecting the borrower a mechanic on heavy equipment, supposedly self employed making 159,856.00 per year (2006) and 138,762.00 (2005) -after expenses. Now there were no salary or employee costs, no insurance costs, – this was a Schedule C filer. The borrower has had a credit history of less than 2 years, very limited and low max credit limits. The bank statements are truly, for want of a better word, Funky. Somehow the photo editor that was used did not match type fonts very well. The borrower was lacking a solid Social Security number, from my point of view he was born in 1969, the Social Security number was issued in 1950. He had no directory listing as per the Broker he got business by word of mouth and contract. Contract (1 only) was extremely Funky – the guy who signed it lived in the Borrower’s present primary residence. Now how do you think I handled that one…….well, sneaky me, ’cause I wanted her (female LO) to get reported to the Treasury Department (the shop I worked in did that), asked for a signed 4506T. Wonder why…… the LO, B*&%h that she was was incensed, went over my head, that did not work (thank god). NO ONE, had ever questioned her, how dare I. “These were perfectly good tax returns.” My response – then get me the 4506T (translation -I want your @ss in a sling). Long and short of the tale – I declined the loan, sent the file to risk mit, they got the tax returns without a 4506T, they have their ways. These were not perfectly good tax returns, the bank whose Statement was altered was contacted and yes it was altered, not even our borrower’s account. The Social Security Number belonged to another party. The institution proceeded to bar the Broker B*&%h and turn her sorry @ss over to the Treasury Department with all other participants in the transaction.
How often does that happen, rarely, they do not turn them over to the Treasury Boys except in a few shops. When I have found this degree of egregious fraud in the past, for the most part I was told to approve it or better yet IMPROVE on it. My response, get the hell out of there.
Now think about this – both of these examples were from this year, they were full doc files. I was supremely lucky that the shop I was in had no tolerance for this behavior. It was the first time in over 5 years that I had worked in that sort of environment, where it was not tolerated. My employment experiences for the past 5 years, excepting this shop, all required the underwriter to ignore and quite frankly often improve on the fraud. No exaggeration, it was de rigeur and in their minds part of the job description.
Having said that, you can only imagine how bad it was with the Stated Products, a person working at WalMart as a clerk on the floor – does not by any stretch of the imagination make 8000.00 a month. What was really tragic, since it got a Refer from CLUES, they wanted me to raise the income until I got an Approve return from CLUES. No, I did not, I walked out that day, with a lot of class and dignity, praying that I could find another job. That company went out of business last February. I keep track for prurient interest and some small degree of vindication.
It is only a very small degree of vindication since I believe that we good industry professionals are all paying for the bad deeds promulgated by this 5 year era of “smoke and mirrors”.
I’ve been following this forum for quite some time now, mostly the homeowner’s forum – but lately this one has attracted my attention much more. As a guy stuck in this market with an upside down loan, it’s a little hard to have compassion for this industry – but many of you seem like stand up folks feeling the same sting from the other end.
Thanks for all you do. I hope you have great 2008!
Tom
Tom,
I wish I could say it is different but it’s not…. Everyone was affected by this on a much larger scale, this affected the entire world. And it was caused by everyone….. Unfortunatly a few bad apples ruin the bunch.
Well Well Well, where were you when I was training ridiculous UW with no experience whatsoever in doing FHA/VA loans. Good for you! If we are good at what we do and submit a CLEAN package, and get an underwriter with at least 60% of your knowledge, we would have happy clients in deed, not to mention a mortgage industry going down hill because of bad LO, AE and Brokers!! Let me know what company you work for, and clean files will come your way!!!
Come on now, everybody does fraud, when a client qualifies for a lower rate, lenders ask as u wanna make a point on the back end, so to me that’s fraud for profit, just keep doing what ur doing. its a roller coaster ride, it has to go up again, just save ur money and keep on doing what ur doing, the lenders and investor can’t have the money sitting in their warehouses, it’s like drugs, u have to move them, does no good sitting there…..